Former Arizona Corporation Commission chairman Gary Pierce was indicted in federal court this week on felony conspiracy, bribery, mail fraud and five counts of wire fraud following an investigation into his relationship with Johnson Utilities owner George Johnson.
Pierce and Johnson are named as defendants in the case, which was brought in the U.S. District Court on May 23, along with Pierce’s wife Sherry, and longtime Capitol lobbyist Jim Norton, who was lobbying on Johnson’s behalf.
Johnson Utilities is a water utility with business before the Corporation Commission. Pierce served on the body from 2007 until 2014.
The indictment alleged that Pierce, his wife, Johnson and Norton conspired to have Johnson pay the Pierce couple through Norton and an “unindicted coconspirator” in exchange for Pierce’s votes.
The indictment alleged that Pierce and his wife received $31,500 unlawfully through a consulting firm directed by Norton, but ultimately from Johnson, in exchange for Pierce’s “favorable and unlawful actions on matters before the ACC.”
Neither Norton nor Gary Pierce could be reached for comment. Johnson wouldn’t comment on the charges, and said to contact his attorney Tom Irvine, who did not immediately return calls for comment.
Last year, the Federal Bureau of Investigations confirmed it was looking into 2014 election spending. Gary Pierce had been interviewed by the FBI, he said at the time. Investigators also took documents from the Corporation Commission and electric utility Arizona Public Service.
Federal documents alleged that Johnson wanted to include his personal income tax expenses in his company’s rate base, thereby making the personal taxes reimbursed by the utility’s customers.
Additionally, Johnson wanted to dramatically increase the rate base for Johnson Utilities’ wastewater division in order to get more in revenues.
Initially, the Corporation Commission unanimously voted down the idea of reimbursing Johnson’s personal income taxes in 2011.
But in 2012, Pierce drafted a policy that proposed allowing companies like Johnson Utilities to recover personal income taxes from their customers. The commission approved the policy in 2013.
In a separate vote, Pierce supported an increase in the company’s wastewater division rate base from about $137,000 to more than $18 million, passing the cost onto the utility’s customers, the charging documents showed.
An unnamed person, directed by Norton, set up a consulting firm and checking account to receive about $6,000 per month, plus expenses, from Johnson. The coconspirator, who is not named in charging documents, then paid Sherry Pierce $3,500. The arrangement was designed to conceal the original source of payments, federal prosecutors alleged. Sherry Pierce received the payments for 10 months in 2011 and 2012.
The indictment alleged that Sherry Pierce was directed to send invoices totaling $3,500 to the consulting firm based on “simple tasks” she was assigned by the coconspirator.
Sherry Pierce also signed a confidentiality agreement with the firm designed to prevent her from telling others about the nature of her employment and the source of the money.
Gary Pierce and Norton also had the chance to purchase some land valued at $350,000, though the funds for the purchase were going to come from Johnson, the indictment said. An email from Pierce to Norton in December 2011 shows an opening bid of $300,000 on the land, along with a letter of intent to purchase it. In the email, Pierce tells Norton he wants to take his name off the letter of intent so that only Norton would be the buyer.
The defendants knowingly concealed the “true nature and purpose of the payment,” ultimately totaling $31,500 and potential property valued at $350,000, the charges said.
The scheme was designed to “defraud and deprive the ACC, the customers of Johnson Utilities LLC and the citizens of the State of Arizona of their right to the honest services of elected members of the ACC through concealment of material information and bribery” in exchange for Pierce’s favorable votes.
Commission spokeswoman Angie Holdsworth said the commission found out about the indictment at the same time as the general public. The commission is reviewing the allegations and had no further comment, she said.
Pierce and his wife received $31,500 unlawfully through a consulting firm directed by Norton, but ultimately from Johnson, in exchange for Pierce’s “favorable and unlawful actions on matters before the ACC.”